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Raner, Harris and Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given: Office Sales Variable expenses Contribution margin. Traceable fixed expenses office segment margin Common fixed expenses not traceable to offices Net operating income Sales Variable expenses Assume that Minneapolis' sales by major market are: Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Total Company $ 472,500 236,250 236,250 132,300 103,950 66,150 $ 37,800 100.00% 50.00% 50.00% 28.00% 22.00% $ 315,000 189,000 126,000 34,650 91,350 15,750 $ 75,600 14.00% 8.00% Minneapolis 100.00% 60.00% 40.00% 11.00% 5.00% 24.00% $ 157,500 47,250 110,250 81,900 $ 28,350 Chicago Medical $ 210,000 134,400 75,600 12,600 29.00% $ 63,000 100.00% 30.00% 70.00% 52.00% 18.00% Market 100.00% 64.00% 36.00% 6.00% 30.00% Minneapolis $ 315,000 189,000 126,000 50,400 $ 75,600 Dental $ 105,000 54,600 50,400 22,050 $ 28,350 100.00% 60.00% 40.00% 16.00% 24.00% 100.00% 52.00% 48.00% 21.00% 27.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,250. Marketing studies indicate that such a campaign would increase sales in the Medical market by $42,000 or increase sales in the Dental market by $36,750. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign? Raner, Harris and Chan is a consulting firm that specializes in information systems for medical and dental clinics. The firm has two offices-one in Chicago and one in Minneapolis. The firm classifies the direct costs of consulting jobs as variable costs. A contribution format segmented income statement for the company's most recent year is given: Office Sales Variable expenses Contribution margin. Traceable fixed expenses office segment margin Common fixed expenses not traceable to offices Net operating income Sales Variable expenses Assume that Minneapolis' sales by major market are: Contribution margin Traceable fixed expenses Market segment margin Common fixed expenses not traceable to markets Office segment margin Total Company $ 472,500 236,250 236,250 132,300 103,950 66,150 $ 37,800 100.00% 50.00% 50.00% 28.00% 22.00% $ 315,000 189,000 126,000 34,650 91,350 15,750 $ 75,600 14.00% 8.00% Minneapolis 100.00% 60.00% 40.00% 11.00% 5.00% 24.00% $ 157,500 47,250 110,250 81,900 $ 28,350 Chicago Medical $ 210,000 134,400 75,600 12,600 29.00% $ 63,000 100.00% 30.00% 70.00% 52.00% 18.00% Market 100.00% 64.00% 36.00% 6.00% 30.00% Minneapolis $ 315,000 189,000 126,000 50,400 $ 75,600 Dental $ 105,000 54,600 50,400 22,050 $ 28,350 100.00% 60.00% 40.00% 16.00% 24.00% 100.00% 52.00% 48.00% 21.00% 27.00% The company would like to initiate an intensive advertising campaign in one of the two market segments during the next month. The campaign would cost $5,250. Marketing studies indicate that such a campaign would increase sales in the Medical market by $42,000 or increase sales in the Dental market by $36,750. Required: 1. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Medical Market? 2. How much would the company's profits increase (decrease) if it implemented the advertising campaign in the Dental Market? 3. In which of the markets would you recommend that the company focus its advertising campaign?
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The companys profits would increase by 12250 if it implemented the advertising campaign in the Medic... View the full answer
Related Book For
Managerial Accounting
ISBN: 9781260247787
17th Edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
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